Flipcart trims UP sales, shuts down music store

LUCKNOW: Non-serious ‘customers’ and pranksters are causing losses to e-commerce sites. Flipkart has stopped high value delivery to Uttar Pradesh. Only last week, Flipkart announced the closure of its music downloading service Flyte.

India’s popular e-commerce dealer Flipkart has stopped delivering consignments worth more than Rs 10,000 to customers in Uttar Pradesh, including NCR regions of Noida and Ghaziabad.

While Flipkart said the decision was “purely business oriented”, insiders said there were numerous instances of customers ordering expensive goods on the cash on delivery scheme and refusing to accept their orders. There have also been cases of fraud in which lost or stolen credit cards were used to book orders online.

Uttar Pradesh is the most populous state in the country and the largest consumer base for all trading companies.

The portal’s shipment delivery staff in Lucknow said there were incidents in which customers ordered expensive goods and then refused to accept them. Sources said many people logged on to Flipkart and ordered “just for fun”.

“It takes a minimum of 10 days to ship a product to a customer and back to the company if it’s not purchased. It causes loss to the sellers, selling via Flipkart, as their products get blocked in transit,” a Flipkart executive said.

A lot of logistical cost is added while moving an order from the company’s warehouse to a consumer. This includes shipping and insurance costs, especially in case of expensive products, besides state taxes. The transportation cost is in proportion to a products’ value, hence return of any expensive product would mean incurring greater loss than rejection of a small value order, priced less than Rs 10,000.

A company takes such extreme decisions only when its overall profitability gets affected while delivering high value products. While delivering across the nation, a company has to comply with a lot of taxation policies of state governments. Scaling up the order value means increasing the risk factor.

Last week, Flipkart, announced that it would shut down Flyte, its digital music store. The store, which primarily competes against Apple iTunes Store, has been losing customers.

“We have realized the music downloads business in India will not reach scale unless several problem areas such as music piracy and easy micro-payments etc are solved in great depth,” said Mekin Maheshwari, head of digital media and payments at Flipkart. “We feel that at present, it makes sense to take a step back from Flyte and revisit the digital music market opportunity at a later stage.”

The executive added that users would not be able to use Wallet, a service that allowed Flipkart customers to put money in a digital locker and use that to purchase songs or ebooks. Instead, they will have to use other payment methods like credit or debit card.

Flyte was launched in February last year., Maheshwari said the service had over one lakh regular users.

Earlier, the e-commerce website sent an email to Flyte customers, notifying them that the service would be shut down on June 17, 2013. “The Flyte MP3 store will no longer be operational after June 17, 2013. We request you to use your Flyte Wallet balance, if any, by that date. But if for some reason you are unable to do this then not to worry. We will refund the unused Flyte wallet balance to you,” the company noted in the email.

All the MP3 files purchased from Flyte on or before June 17, 2013 will continue to be available for download in the digital library till August 18, 2013.

When launched, Flyte was a unique service for India, which at that time did not have iTunes Store. It sold a digital song between Rs 6 to Rs 15. The songs were sold without any digital rights management, a technology that controls their use on behalf of copyright owners. Customers were free to play the songs downloaded from Flyte in any computer, smartphone or music player.

Initially, Flipkart set a limit on how many times a user could download the song from its servers. It said that after purchase the song could be downloaded only 5 times. However, After Apple’s iTunes Store started operating in India in late 2012, Flipkart removed this limit.

Unfortunately for Flipkart, removing the download restrictions was not enough Many Flyte consumers switched to iTunes when it launched in India. In India, music piracy remains a challenge, and iTunes Store has better acceptability among the consumers most likely to spend money on digital content.

Bobin James, a media professional who writes on music, said that he switched from Flyte to iTunes Store because of the “poor experience” with the Flipkart service.

“Ideally, when I download an album, I would like it to appear in a folder neatly in order. With Flyte, track names didn’t carry track numbers. Which meant that in my local folder, they would be listed alphabetically,” said James. “The ID3 taggings were either absent or inconsistent. So more time wasted on sorting that. The Flyte download manager was full of bugs.”

A service like Flyte also faces challenge from companies like Nokia and Sony that allow people who buy their smartphones to download millions of songs for free or at very nominal cost.